Jones Day for Hostess, Simpson Thacher: Business of Law

By Elizabeth Amon -
Nov 20, 2012

The judge overseeing Hostess Brands
Inc., while declining to approve the company’s liquidation,
asked management and the bakers’ union to enter mediation today
to resolve the strike that the maker of Twinkies and Wonder
bread said forced it to shut. Hostess is being advised by Jones
Day.

U.S. Bankruptcy Judge Robert Drain said yesterday at a
hearing in White Plains, New York, that there are “serious
questions as to the logic behind the decision to strike.”
Hostess and the bakers’ union agreed to Drain’s request to enter
confidential mediation under his supervision.

“To me, not to have gone through that step leaves a huge
question mark over this case which I think will only be answered
in litigation,” Drain said. “My desire to do this is prompted
primarily by the potential loss of over 18,000 jobs, as well as
my belief that there is a possibility to resolve this matter,
notwithstanding the losses the debtors have incurred over the
last week or so.”

Hostess hasn’t spoken with the Bakery, Confectionery,
Tobacco Workers and Grain Millers International Union since
August, said Heather Lennox, a partner at Jones Day working for
the company. Hostess is seeking permission from Drain to pay
bonuses to key managers while closing operations that will leave
most of its 18,500 workers unemployed. Any agreement arising
from the mediation would probably come too late to save the
company, Lennox said.

“Things have gone too far to repair themselves under the
current form,” Lennox, told Drain. “It would be very hard for
us to recover from this damage even if there were to be an
agreement in the near term.”

“Our best shot is to see what we can sell as going
concerns and have the company continue that way,” she said. The
hearing to consider Hostess’s request to wind down was postponed
until Nov. 21.

Hostess said Nov. 16 that it would shut, claiming that a
weeklong strike by the bakers’ union forced liquidation. The
union blamed management’s concession demands, while some
employees blamed both sides. Strikers were still outside the
company’s facilities yesterday, Hostess’s lawyers said.

Corrina Christensen, a spokeswoman for the bakers’ union,
didn’t immediately respond to an e-mail seeking comment on the
mediation.

The judge may be creating risk for both sides that
encourages them to reach a deal, Ken Russak, a bankruptcy
attorney at Frandzel Robins Bloom & Csato in Los Angeles, said
yesterday in an interview. “The bankruptcy judge would much
prefer to have the parties work something out than having to
make a decision in this highly charged environment,” Russak
said.

The case is In re Hostess Brands Inc., 12-22052, U.S.
Bankruptcy Court, Southern District of New York (White Plains).

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NYSE Hires Chertoff After SEC Report Cites Online Security Lapse

NYSE Euronext (NYX) hired Michael Chertoff, the former U.S.
Secretary of Homeland Security, after a report by Securities and
Exchange Commission examiners found staffers may have violated
rules for safeguarding computers at a division that oversees
exchanges.

Chertoff, who served as homeland chief under President
George W. Bush and is now a lawyer at Covington & Burling LLP,
has been retained by the New York Stock Exchange owner,
according to spokesman Robert Rendine. The appointment followed
a report prepared Aug. 30 by SEC interim Inspector General Jon T. Rymer that found some employees in the agency’s division of
trading and markets failed to properly secure computers that may
have contained classified exchange data. Rymer’s report found no
evidence the devices were breached by hackers.

Online attacks at exchanges could allow perpetrators to
provide false information that might move the price of
securities. The SEC lab under investigation was responsible for,
among other things, assessing the vulnerability of computer
systems at stock exchanges. John Nester, a spokesman for the
SEC, said the people who oversaw the equipment referenced in the
report have left the agency.

“NYSE and Nasdaq OMX are active on a global scale
marketing different communications systems and linkages and
software so the IT side of their business is becoming much more
of a revenue center and that could explain them becoming
sensitive,” David Donald, executive director of the Centre for
Financial Regulation and Economic Development at the Chinese
University of Hong Kong, said in a telephone interview. “They
see this information as being very valuable.”

While the inspector general is “not presently aware of an
actual breach,” unprotected laptops were left unattended in
hotel rooms, offices outside the SEC, hooked up to public
Internet connections and used to check personal e-mail and
download freeware, according to the Aug. 30 report, seen by
Bloomberg.

London Mayor Boris Johnson urged Russia’s oligarchs to sue
each other in the city’s courts, in contradiction of the
government’s policy of discouraging “libel tourism.”

“If one oligarch feels defamed by another oligarch, it is
London’s lawyers who apply the necessary balm to the ego,”
Johnson told the Confederation of British Industry’s annual
conference in London yesterday. “I have no shame in saying to
the injured spouses of the world’s billionaires: if you want to
take him to the cleaners, take him to the cleaners in London,
because London cleaners will be grateful for your business.”

The Defamation Bill, currently going through the upper
chamber of Parliament, requires the plaintiff to show that the
U.K. is clearly the most appropriate place to bring a case,
rather than simply the one where it will be easiest to win. The
then-justice secretary, Ken Clarke, said in March of last year
the bill was designed, among other things, to stop U.S. citizens
from suing U.S. publications in London.

“We are trying to dissuade libel tourism on a point of
principle,” Prime Minister David Cameron’s spokeswoman, Vickie Sheriff, told reporters yesterday.

Johnson argued that such cases, with the associated legal
fees, are welcome. The money, he said, would go “into the
pockets of chefs and waiters and doormen and janitors and
nannies and tutors and actors and aromatherapists -- and keep
the wheels of the economy turning, and put bread on the tables
of some of the poorest and hardest-working families in the
city.”

Wilson Sonsini has represented Meraki from its inception,
with Steve Bochner and Proffitt as the lead relationship
partners. The Meraki in-house legal team was led by Sean Butler.

Cisco, the world’s largest maker of computer-networking
equipment, is using a combination of cash and retention-based
incentives to pay for the acquisition, the San Jose, California-
based company said in a statement.

Chief Executive Officer John Chambers is seeking to
capitalize on the boom in demand for smartphones and tablets in
the workplace by snapping up a company that helps businesses
manage security and wireless access points via the Internet. The
deal is aimed at broadening the customer base as Cisco cuts
costs, shuts underperforming divisions and trims prices to fend
off rivals such as Hewlett-Packard Co. (HPQ) and Juniper Networks Inc. (JNPR)

San Francisco-based Meraki expects about $100 million in
bookings this year, and its employee base has ballooned to 330
from 120, Meraki CEO Sanjit Biswas wrote in a letter to
employees discussing the deal.

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Moves

DOJ Antitrust Chief Wayland Returns to Simpson Thacher

Joe Wayland, the Acting Assistant Attorney General of the
U.S. Justice Department’s Antitrust Division, has returned to
Simpson Thacher & Bartlett LLP as a partner in the litigation
practice.

Wayland, who joined the Justice Department in 2010 as the
deputy assistant attorney general for civil enforcement in the
Antitrust Division and was named acting head of the Antitrust
Division in April 2010, oversaw the division’s criminal and
civil matters.

Among his litigation victories was the government challenge
to H&R Block’s proposed merger with TaxAct, which was the
agency’s first successful litigation challenge to a merger in
eight years. He also led the trial team that challenged AT&T’s
proposed $39 billion purchase of T-Mobile USA, which was
abandoned after four months of litigation, the firm said.
Wayland was also involved at the Justice Department in policy
initiatives directed at potential patent misuse and competition
issues arising from health-care consolidation.

“Joe’s valuable government experience and achievements
will be an asset to our clients and also complement the deep
public sector experience of our antitrust team,” Pete Ruegger,
chairman of Simpson Thacher’s executive committee, said in a
statement.

Wayland joined Simpson Thacher in 1988 and became a partner
in 1994. During his time at the firm, he represented clients in
criminal and civil matters, including monopoly abuse cases,
international cartel investigations and alleged anticompetitive
conduct.

Simpson Thacher has more than 850 lawyers. The firm is
based in New York with 11 offices in the U.S., Sao Paulo, London
and Asia.

Firm News

Nelson Mullins Hires 16 Lawyers in Boston from Cetrulo & Capone

Nelson Mullins Riley & Scarborough LLP hired 16 attorneys
from Cetrulo & Capone LLP, now Cetrulo LLP, who will make up two
litigation teams in the firm’s Boston office. The new attorneys
will be focused on civil litigation, construction and surety law
or product liability and catastrophic accident litigation.

Bert Capone, Tom Hayman and Jim Carroll will lead the new
lawyers. Capone and Hayman will head the construction and surety
law group, while Carrol will head the liability team.

“We are pleased to have this experienced group join our
firm,” Boston managing partner Amy Mandragouras said in a
statement. “These attorneys have considerable experience in and
ties to New England, and beyond, and have been active in some of
the more high-profile cases in the region.”

Capone is primary trial counsel in surety, construction and
construction-defect cases ranging from contractor defaults to
defective construction performance. Hayman concentrates his
practice in commercial, surety/construction and construction-
defect litigation. He was involved in both the Providence and
Big Dig litigations. Carroll’s trial practice has involved the
defense of negligence and wrongful-death actions in product-
liability cases and municipal-liability matters. He also
represents several insurers in a variety of coverage matters.

Five others join the firm as partners. They include Dwight
T. Burns III, who represents clients in construction-related
civil litigation; Gregory J. May, who concentrates on
environmental, products liability, and commercial claims;
Francis R. Powell, who represents clients in commercial
disputes, construction and surety litigation and defense of
product liability and personal-injury claims. He also has been
engaged in Big Dig litigation. Litigator Michael F. Sommerville
focuses on environmental and toxic tort litigation brought by
and against insurers and insured companies. Gillian A. Woolf
concentrates on the defense of commercial claims.

Lawrence G. Cetrulo, founding partner of the Cetrulo firm,
said he and Capone had been partners for 17 years and had been
discussing a division of their practices for several years. “I
handle commercial litigation on the defense side and toxic
substance defense,” Cetrulo said. “The construction and surety
practice didn’t overlap and it made sense to split up. We wish
him good luck.” Cetrulo also said his new firm is exploring
strategic alliances and he expects the 40-lawyer firm to grow.

Nelson Mullins’s Boston office opened in 2006 with two
lawyers. It now totals 55 attorneys. The firm has more than 470
attorneys and government-relations professionals at 13 U.S.
offices.

Litigation

Starr Suit Against New York Fed Over AIG Bailout Dismissed

Starr International Co.’s lawsuit against the Federal
Reserve Bank of New York over the government’s bailout of
American International Group Inc. (AIG) was dismissed by a federal
judge in New York.

Starr, an AIG shareholder headed by the insurer’s former
chief executive officer, Hank Greenberg, claimed the government
used its 2008 bailout of the New York-based company to channel
money improperly to its trading partners. U.S. District Judge
Paul Engelmayer in Manhattan rejected the claims in a decision
that was made public Nov. 16.

Starr is considering an appeal, Robert Dwyer, a lawyer with
Boies, Schiller & Flexner LLP, which represents the company,
said in a statement yesterday. Engelmayer’s ruling doesn’t
affect a parallel suit filed against the U.S. government in the
Court of Federal Claims in Washington, Dwyer said.

Starr sued the New York Fed last November, saying it
breached its fiduciary duty to AIG shareholders by loaning $85
billion at 14.5 percent interest while offering better terms to
banks in a “backdoor bailout.” AIG almost collapsed after bets
tied to the housing market soured, and the bailout was revised
at least four times before reaching $182 billion.

Starr said in its complaint that the bank coerced, induced
and required AIG directors and officers to “violate their
duties” to Starr International and AIG. Beginning in 2008 and
continuing until at least January 2011, the federal government
“imposed a series of transactions” that “resulted in
depriving” AIG and its shareholders of tens of billions of
dollars, Starr said.

In his decision, Engelmayer said that Starr can’t use the
law of Delaware, the state in which AIG is incorporated, because
it is pre-empted by federal law.

Engelmayer also said that despite a complaint that “paints
a portrait of government treachery worthy of an Oliver Stone
movie,” Starr failed to make a plausible argument that the Fed
exercised sufficient control over AIG to support a claim that it
had a fiduciary duty to the company.

The New York case is Starr International Co. v. Federal
Reserve Bank of New York, 11-8422, U.S. District Court, Southern
District of New York (Manhattan).

To contact the reporter on this story:
Elizabeth Amon in Brooklyn, New York, at
eamon2@bloomberg.net